Commercial bridge loans are an option for businesses that need temporary financing. These bridge loans are usually associated only with real estate, but they can be for numerous other things.

When you decide to secure a commercial bridge loan, you need the loan to work for your business. Consider the following suggestions to ensure that you are making the most of mortgage bridge loans you secure for your business:

1. Explore all the possible ways to use gap funding for your business.

2. Get the funding you need as fast as possible.

3. Familiarize yourself with bridge loans terminology to ensure you can use it the way you need for your business.

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Consider all the possible ways to use bridge loans

Many people think that bridge loans are strictly used to close the gap in funding when selling an already owned property and purchasing a new property. In truth, these loans can be used to pay employees during the off season, to upgrade your business property or to purchase inventory.

I recommend: Security National Capital offers suggestions on different ways to use commercial bridge loans. The article covers the advantages and disadvantages of using bridge loans for businesses. The New York Times offers an article that explains different types of bridge loans and what each kind is used for.

Secure the gap financing as fast as possible

When you are securing mortgage bridge loans, time is usually a major consideration. Getting the mortgage and bridge loans approved as fast as possible ensures that you get the property you want and the current interest rate. Little things like having your financial statements in order, dealing with a company you already have accounts with and calling the mortgage company can help your loan get approved faster.

I recommend: PrivateMoneyMortgages.com offers an in-depth article that features suggestions on how to get interim loans approved as fast as possible. Pathfinder's Mortgage offers tried and true suggestions to get your gap financing approved as expeditiously as possible.

Understand the bridge mortgage terminology

Understanding the terminology associated with your bridge loan allows you to have total understanding about your loan. For example, an alienation clause is a stipulation that you must pay the full balance of the loan when the property is sold. A recording fee is the fee assessed by your local government to record a real estate transaction. Knowing these terms may not seem like an integral part of using mortgage bridge loans, but these terms can make stipulations about how the funding can be used and what your responsibilities are in paying back the loan.

I recommend: MortgageLoan.com offers a glossary of personal finance terms, including terms you will find on bridge loan financing forms. All of the explanations are written in everyday language, which makes them easy to understand. BankRate.com has an up to date glossary of common mortgage terms.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  You will have to pay closing costs and other fees on the bridge mortgages you secure, so you should have the money on hand to pay these fees as soon as you get the approval for your bridge funding.

Bridge mortgages, also called interim loans or a swing loan, are used if you’re selling one property and need the proceeds from that sale to finance the purchase of another property. You can use bridge loan financing for a home purchase, or you can take out commercial bridge loans for your small business.

Mortgage bridge loans are available in two types. The first swing loan option uses your current property as collateral, allowing you to close on the new space, pay off the old mortgage and raise cash for the down payment on the new property. Monthly payments are not usually required; you simply pay off the balance when the old property sells. The second type of bridge loan financing involves keeping your current mortgage, borrowing against your current property’s equity and using that money as the down payment on the new property.

To find the best mortgage bridge loans for you:

1. Shop around for mortgage and bridge loans as rates vary from lender to lender.
2. Start your search online and compare rates and terms on home or commercial bridge loans.
3. National and regional mortgage lenders are great sources for bridge loan financing, but if you have a risky or specialized situation, you may consider mortgage companies that focus on risk financing.
4. Mortgage bridge loans can be helpful in getting through the time-consuming closing process, but keep in mind the risks involved with essentially carrying three mortgages.

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Your local bank is a good starting point for bridge loan financing

Many commercial bridge loans and residential bridge loans are given through local lenders who understand your area's real estate market. Compare rates at local banks that offer gap financing.

I recommend: Search by city for local lenders with LocalLender.info or USCITY.net. Also MortgageLoan.com lets you search their list of lenders, many of which offer interim loans.

Shop for bridge mortgages with national lenders

National banks offer bridge loan financing. Go to the national lender where you have your initial mortgage and bridge loans may be easier to secure.

I recommend: Check with national lenders, such as GMAC Mortgage and Wachovia for bridge funding. Or check out Equifax, which offers a nationwide mortgage referral service, so you can get a list of lenders who offer bridge loans for mortgages.

Find a lender that specializes in mortgage bridge loans

Depending on how risky or specialized the funding you need is, another tack is to work with specialty lenders. Take note that the swing loan rate may be higher with lenders that specialize in gap financing than with a regional or national lender.

I recommend: For residential or commercial bridge loans, check major lenders, such as Security National Capital, Mercury Capital and People’s Choice Commercial Lending. Some lenders, such as GE Real Estate, Madison Realty Capital, 1st Bridge and Fairfield Financial Services specialize in commercial bridge loans, especially for larger projects.

Vet lenders before accepting bridge loan financing

Make sure the bridge funding lenders you're considering haven't been reported by borrowers for unethical business practices and are in good standing with state and federal regulators.

I recommend: Contact the Better Business Bureau to find a BBB chapter in your state or city to check on lenders offering mortgage and bridge loans.

Get bridge loan information from the experts

Real estate blogs written by experts are a great resource for boning up on mortgage and bridge loans.

I recommend: C-Loans.com, a commercial real estate blog, includes info on mortgage and bridge loans. ActiveRain and Searchlight Crusade are also reputable blogs written by industry experts that cover mortgage bridge loans.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Bridge loans for mortgages have a higher rate of risk than other mortgages, with average fees and rates typically running about two percentage points higher than traditional home mortgages.
• •  Using the same lender for your new mortgage and bridge loans may result in a better rate.
• •  A swing loan is meant to be a short-term loan and is typically expected to be paid back within six months.

Bridge loans are a funding tool that businesses can use to purchase new properties before already owned properties are sold. These loans are intended to be short term loans and are considered a risky venture because they are made under the assumption that the property you are selling will in fact sell prior to the bridge loan maturity date.

Before you commit to a bridge loan, it is important that you understand the mortgage bridge loans basics. Consider the following suggestions to learn about these loans:

1. Know the intended purpose of bridge loans.

2. Understand the basic criteria for securing commercial bridge loans.

3. Explore alternative options prior to pursuing a commercial bridge loan.

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Consider the purpose of a swing loan

A bridge loan allows you to purchase a new property before your existing property sells. These loans are short term loans, generally with a maturity date of 12 to 18 months. If your existing property isn't sold within that time frame, you will have to begin making interest only payments toward the bridge loan in addition to paying your regular mortgage payments.

I recommend: Target Woman offers an easy to understand description of a bridge loan. You can also find information on bridge loan repayment on this website. MortgageLoan.com offers bridge loan information, including the things to consider regarding swing loans and the benefits of bridge loans.

Know the basic criteria for a swing loan

Determining if you are eligible for a bridge loan involves finding out the regulations and standards for mortgage and bridge loans. For example, you should know that in most cases the company that will hold the mortgage on your new property can issue a bridge loan.

I recommend: Yahoo! Finance offers basic information about bridge loan financing. This website has numerous tools to help you find the best loan for your needs, including an article with information about what to look for when shopping for a mortgage and a mortgage calculator. You can find in depth information about mortgage bridge loans, including commercial bridge loan information, at Articles.DirectoryM.com.

Consider alternatives to bridge loans

For most lenders, commercial bridge loans may prove to be a costly option. These loans have higher than average interest rates and numerous fees. Because of this, it may be better for you to consider other financing options, such as a personal loan, borrowing from your 401(k) or selling stocks.

I recommend: You can find some information about bridge mortgages and some possible alternative places to find gap financing at RealEstateABC.com. BankRate.com offers an article that includes alternatives to bridge mortgages.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Keep in mind that traditional mortgages and bridge loans both have closing costs and other fees. Because of this, your out of pocket expense can be considerable.

Mortgage bridge loans have become an important part of property purchasing in a slow housing market. In an up market, people do not have to worry about purchasing real estate contingent on the sale of existing property owned. In a slow market, it becomes necessary to have some bridge financing. Those in need of a mortgage bridge loan need to know key terms associated with these loans including mortgage points, prepayment penalties and mortgage closing costs.

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Swing loan, gap financing

A swing loan or gap financing are terms used synonymously with a bridge loan. These are short-term mortgage loans used by homeowners selling one property and purchasing another. These loans allow the homeowner to use their current property as collateral to pay off an existing mortgage or to use as a down payment on a new home.

I recommend: For Beginners offers a thorough explanation of how swing loans, or bridge loans, are used.

Mortgage points

In mortgage bridge loans, a property owner may be charged as much as two mortgage points for the use of the loan. Mortgage points are equal to one percent of the loan amount.

I recommend: Bankrate provides more information on mortgage points.

Mortgage closing costs

When considering a bridge loan, individuals should strive to understand closing costs. These are the costs of establishing the loan and including application fees, appraisal fees, title search costs and more.

I recommend: Mortgage-X provides a complete list of all closing costs and an explanation of what they are.

Prepayment penalties

Prepayment penalties may be placed onto a bridge loan. This type of penalty charge a sizable fee when the loan is paid off early, ahead of regularly scheduled payments. When applying for bridge loans, investors should find out if prepayment penalties are included, particularly because many homeowners will want to close out loans before the end of the loan term.

I recommend: The Wall Street Journal provides information and examples of how prepayment penalties can affect a mortgage loan and the borrower.

Down payment

Processds from bridge loans are often used as a down payment toward the purchase of another house. A down payment is a lump sum payment on the property made by the buyer.

I recommend: Mortgage101 provides more information about down payments.

Home equity line of credit, HELOC

Due to the costs and risks associated with bridge loans, many experts recommend that borrowers, instead, consider a home equity line of credit. This type of loan offers a much lower interest rate and there's less risk involved.

I recommend: MortgageLoan provides more information on the home equity line of credit as an alternative. Be sure to see their page on HELOC.